Non-retail people seldom see the stores selling as a paycheck.

If after working, they were asked to take an 8% pay cut (whatever their source of income) because someone in India will do the same work for less money, they would be furious.

If the same negotiation were done BEFORE their employment, they would be upset, but not as angry.

That is what they did to the store owner. And they had no idea they were insulting him and everyone they came in contact with. Their shopping experience may not have been perfect (maybe people were sick that day, or there were more customers than expected,), but it was 100% better than what is physically possible on line.

Like she said, you have to try the helmet on. On line, that could have meant mailing several helmets back & forth. If they get paid even $10/hour the time wasted could easily be over $100.
Too bad the store owner couldn’t, on the spot, think of a diplomatic people to tell these people that they weren’t spending an extra $20, they were saving at minimum an extra $80. But then, if Michelle & her husband were as intelligent as they appear, they should have figured it out on their own.
Fran
Retail store owner

In Michelle’s defense, it sounds like the service was terrible but you are right that there has been a huge shift.

The assault (I can attest from experience) on Main Street has been going for a very long time. And is based in Federal and State policies that have favored large retail over small retail.

During the Great Depression, laws were enacted (the Robinson Pattman Act for example) that prevented large companies from getting any discounts greater than the actual savings due to the reduced costs/efficiency of distribution of larger quantities. It created an even playing field for small business on price and terms & conditions. Starting in the late 1970s and early 1980s, the US government stopped enforcing this law (which still on the books). In a meeting with Senator Schumer in the late 80′s he baldly stated that not only was the US government NOT going to enforce this law but was going to get rid of it and any others that prevented large corporations from getting greater discounts.

This led to pricing AND the T & C’s (like return policies) differentials that effectively created a 30-40% cost difference between the largest retailers and the smallest retailers on most items. It takes an incredible amount of service to make up that much profit. Even on very technical, support driven sales a B&M can not make up the difference. Many manufacturers used this lack of federal oversight to squeeze the very smallest of their dealers out.

Financing also became much more difficult for B&M as local banks were replaced with national or international banks. The large scale retailers were often financing their inventory costs with stock offerings while small retailers financed theirs with ever more expensive bank loans.

State and local development policies incented new buildings in the suburbs with 10 year property tax abatements. Older city center buildings, often occupied and owner by traditional B& M retailers, were not similarly discounted. The likes of Walmart took particular advantage of these rules and essentially lived for 10 years or so property tax free in a building before abandoning it. Creating yet another cost differential.

The federal government has had a role to play as well in passing a law that made all internet purchases tax free. One of Amazon’s huge competitive advantage has been that 8% differential.

As the retail economy has shifted from small to large retailers a number of structural issues have resulted. The one mentioned above relates to rural America. Roughly 50% of every dollar spent stays locally with a small retailer vs. about 15% with national B&M stores. This loss of circulating dollars has had a huge affect on many smaller towns. In isn’t just that Main Street is threatened. In smaller markets this has all lead to the near complete demise of the towns as well.

Ultimately local & state governments will be able to collect sales taxes from the likes of Amazon. In fact they have been forced in that direction of late. Land use policies are slowly changing and perhaps will be forced to change due to environmental and local cost issues.

It has taken 60 years to get to this state of affairs and it could easily take another 60 to get it straightened out. Whoever called markets efficient didn’t ever look at real ones to see that in that “efficiency” is a whole lot of disruption and pain and wasted costs. The “smart” retailers have figured out how to shift those costs to the greater society whereas the small retailers did not.

But small business folks are a resilient even stubborn bunch though and as David pointed out, many have managed to survive in the more active and lively markets. What the future holds is not clear but the trends are and they do not bode well.

But her husband would never have bought that helmet from anyone at anyprice if he hadn’t tried it on.

Her husband only got price-sensitive after his local store assumed the risk by giving him a free demo. Which, of course, isn’t free — it’s an expensive bit of good-faith.

(Michelle doesn’t seem aware that her husband could have negotiated before trying on the helmet — ie, before taking value.) That would have been fair.

I think Main Street is doomed, because Michelle isn’t an odd case — she really thinks her husband’s behavior was fine, and the vendor’s was outrageous. In 2002, no one would have agreed, and she would have been ashamed to have her picture on her post. It would have been incredibly tacky. Now, it’s fine.

It’s all pretty scary when you think about what this means for the social contract, local communities and their tax bases.

Needless to say, we’re shifting strategies to focus on our online business in hopes of making that portion successful enough to close the walk-in store.

In addition to the increased costs of doing business, in-store customers are about 20 times more likely to want to return something, and if we accept that return, we have to eat it because we can’t sell it again as new. Customers don’t seem to care much about the fact that we have to pay the employees who deal with them for 20 minutes, fitting their stockings until they fight the right size, then ringing them up – totalling half an hour in some cases for a single customer for a margin that doesn’t even come close to covering costs. This is especially true after they decide two weeks later they don’t want the item (or no longer need it) and believe they are entitled to a full refund for a product we had to pay for, not to mention the cost of employee time, rent and utilities needed to provide them with a physical storefront.

Anyway, Mr. Blumenthal (or is it plural?) hit the nail-on-the-head with this one. As a retailer who competes in both arenas, I can relate 100% to just about everything covered in this piece.

It puts enormous pressure on the smb.

I came out of a retailing background, serviced retailers for years as a commercial RE broker leasing space, etc. I’ve seen those numbers about retail space in the US versus other nations over the years. News about it is more stark now.

The info didn’t really sink in until the huge recession/ the growth of unemployment and its impact on retail. SMB’s and large chains alike are falling into bankruptcy and closing. OTH, astonishingly those spaces are being filled pretty successfully on a nationwide basis….though much of the space is being filled by services…not retailers. —You can’t buy a sweaty gym workout on the web….though you can buy gym equipment on the web and from b&m’s.

The pressure and ante are upped on local B & M’s. Its a tough environment.

As I said, the SMB failed at their primary task of helping you perceive the value.

It is a vicious cycle for most SMBs. They lose a chunk of their sales to a big box store or to online, they struggle with the same cost structure but less profit, they chince out on employee pay and employee training…. its a downward spiral that is hard to arrest.

The lack of service compounded with what he learned about the pricing from his search on his phone while at the store ensured this business lost not only a sale but a customer.

The point I had hoped to make by relaying my husband’s experience is over the years I’ve noticed fewer small businesses providing the service that in the past has always set them apart from the big box stores. If I have to make a purchasing decision on price alone, I will purchase the lower priced item.

Your response indicates the nature of the dilemma for the retailer. They had the helmet in stock, they provided it for you to try on, they had a sales person spend time with you. Yet you were unwilling to pay the 8% differential (not counting tax and shipping). I can attest to the fact that their cost differential given property taxes, heat, light, carrying costs, floor salaries and other costs unique to Bricks and Mortar is a lot more than 8%.

I am not saying that you should or shouldn’t pay the 8% premium but you did certainly receive value for the difference. You just didn’t think it was enough to warrant the purchase and the store was unable to create the feeling for you that it was.

I doubt that the solution for the B & M retailer lies in lowering the price. But your story certainly reinforces my point that a small retailer can no longer easily sell standardized, off the shelf products and make money at it.

Case in point. This fall my husband was looking to purchase a motorcycle helmet. Such a purchase is not one that is easily made online as you really have to try it on to be sure it fits. He went to a local shop and found one that fit well so while there he did look up the price offered at online shops

The helmet was an XXL and was priced $20 more than the same helmet in a smaller size at this retail shop. Online the same helmet even in the XXL was priced the same as the smaller sizes.

My husband told the salesman he wanted to purchase the helmet but not at the increased price, at the same price as the other sizes. The salesman said he couldn’t do it so my husband asked to speak to the manager who refused to drop the price as well so my husband walked out and will never go back.

This local retailer not only lost a $250 sale but also lost a long term customer over $20.

Small businesses will continue to be successful if they go back to the principles of providing an excellent experience for the customer.

Because of the lack of density and the suburbanization that occurred, the impacts of big box and internet retailing were more obvious very early on. This is true across rural America and has been for the past 10-15 years. However the recent decline of the inner ring of suburbs is also a symptom and you see many empty store fronts there as well.

The economy, the region, the size of the town all make a difference but the pressures are the same. When you add in the fact that there is “approximately 46.6 square feet of retail space per capita in the U.S., compared to two square feet per capita in India, 1.5 square feet per capita in Mexico, 23 square feet per capita in the United Kingdom, 13 square feet per capita in Canada, and 6.5square feet per capita in Australia” you can see that there will be continued closings. Add to that the affect of large scale capitalization and favored pricing schemes that the larges chains receive and the ever growing impact of the internet, then the outcome seems in little doubt to me. Standardized products and services will be sold by the big boys. Niches, if they grow and become profitable, will become the province of the efficient and well capitalized.

Portland has a unique approach to density and that favors both diversity in retail and botique retail. But as you point out, the trend even there is towards big box and strip mall chains. To me, unless the current social and economic reality changes, these trends will continue. This new technology that allows instant on site look ups is but one small piece of bigger picture that doesn’t really favor small, independent retailers.